If you are having a difficult time getting your business loan approved, then do not hesitate to get help from the SBA. The SBA or Small Business Administration is government organization especially created to assist small-scale businesses.
Aside from helping a small business obtain financing, the SBA also offers other assistance programs including counseling and advice.
How is Business Financing Provided?
It’s important to understand that the SBA does not directly provide funding to small businesses. Instead, it helps small business owners get the financing they need from an accredited lending company. A lending company that is certified by the SBA will surely provide loans with fair terms of repayment so you can get financed by a trusted lender.
In addition, the SBA will review your loan application and evaluate your eligibility for a loan. Once approved, the SBA will provide its guarantee the small business loan lender. With the SBAs guarantee, a lender feels more confident to grant your loan request.
Who Are Eligible for SBA Loans?
- Operate for profit
- Be small, as defined by SBA
- Be engaged in, or propose to do business in, the United States or its possessions
- Have reasonable invested equity
- Use alternative financial resources, including personal assets, before seeking financial assistance
- Be able to demonstrate a need for the loan proceeds
- Use the funds for a sound business purpose
- Not be delinquent on any existing debt obligations to the U.S. government
Who is NOT Eligible for SBA Loan?
- Financial businesses primarily engaged in the business of lending, such as banks, finance companies, payday lenders, some leasing companies and factors (pawn shops, although engaged in lending, may qualify in some circumstances)
- Businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds (except when the property is leased to the business at zero profit for the property’s owners)
- Life insurance companies
- Businesses located in a foreign country (businesses in the U.S. owned by aliens may qualify)
- Businesses engaged in pyramid sale distribution plans, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants
- Businesses deriving more than one-third of gross annual revenue from legal gambling activities
- Businesses engaged in any illegal activity
- Private clubs and businesses that limit the number of memberships for reasons other than capacity
- Government-owned entities
- Businesses principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting
- Consumer and marketing cooperatives (producer cooperatives are eligible)
- Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans
- Businesses in which the lender or CDC, or any of its associates owns an equity interest
- Businesses that present live performances of an indecent sexual nature or derive directly or indirectly more 2.5 percent of gross revenue through the sale of products or services, or the presentation of any depictions or displays, of an indecent sexual nature
- Businesses primarily engaged in political or lobbying activities
- Speculative businesses (such as oil exploration)
SBA Loan Application. The application form that you need to submit will vary depending on the type of SBA loan program you wish to apply for. The forms are available from the SBA’s website or your SBA preferred lender can provide you with the forms.
Personal Financial Statement. As the owner of the business, you would be required to submit copies of your personal financial statements such as copies of your most recent pay stubs and income tax returns.
Business Financial Statement. You must also prepare to submit balance sheets or financial records of your company for the previous months or year (if applicable). You must also include your business income tax returns and business income projections for the coming year.
Business Certificate / License. You may need to provide copies of business licenses and permits along with your loan application. Most of this information is easy for your lender to find online. But sometimes if they can’t find it, make sure you can easily provide it for them.
Business Plan. In your business plan, you must clearly present the type of business you are managing, a brief history of your company and the reason why you are seeking an SBA loan. Don’t forget to show how this form of financing can help your business, how you plan to utilize the funds efficiently, and how you will be able to keep up with repayment.
Things To Rememember
Obtaining a SBA loan guarantee isn’t difficult if you meet their minimum requirements. Keep in mind SBA lenders like to see borrowers with good credit, financial means outside of the loan and some sort of collateral. Usually they like to see equity in real estate.